Ethanol fuels higher food prices

It was milk prices that first caught the attention of grocery shopper Kristen Vander Glind. “I always buy the twin packs of milk,” she said. “Those went up about 75 cents.” But milk is not the only grocery item on the rise.
Measured from May of 2006 to May of 2007, the U.S. Department of Labor reports the following price increases:

Cereal up 3.7%

Beef and veal up 5.8%

Chicken up 6.5%

Whole milk up 8%

Bread up more than 8.1%

Eggs up 29.6%
“I don't think this is just a blip,” said Michael Swanson, agricultural economist at Wells Fargo. Swanson said most of the increase in food prices can be pinned on energy.
Higher fuel prices mean it costs more to grow and transport crops. But Swanson says an even bigger factor is hundreds of millions of bushels of corn that used to feed people and livestock, now being converted into ethanol.
“They accept trucks night and day at the ethanol plants so it's just literally a river of corn going in,” said Swanson. “Right now food and fuel are competing for the same corn.”
Since farmers are planting more of their acres in corn, Swanson said crops like soybeans and wheat are going up in price too. “There isn't a single commodity out there that's really not looking for a local high, or in some cases a multi-decade high.”
There is an upside to higher corn prices. Minnesota grows a lot of it, and Swanson says the state's corn growers and indeed the entire rural economy is already benefiting.